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  • USD/INR takes U-turn from three-day top as RBI keeps repo, reverse repo unchanged.
  • Indian central bank invites retail investors to gilt markets, Governor Das praises budget to mark recovery hopes.
  • US stimulus chatters, vaccine news favor bulls during the pre-NFP trading lull.

USD/INR takes a U-turn from Tuesday’s top while declining to 72.91, down 0.05% intraday, in a swift reaction to the Reserve Bank of India’s (RBI) monetary policy moves during early Friday.

The RBI left benchmark interest rates, namely repo and reverse repo, unchanged near 4.0% and 3.35% while matching wide market expectations.

However, opening the bond markets for retail investors could be considered a drastic measure to pump the economy out of the coronavirus (COVID-19)-led woes.

The Indian central bank also showed readiness to restore the cash-reserve ratio (CRR) to its normal levels in two phases from the current level of 3.0%. As a result, the first push effective March 27 will eye for 3.5% CRR while the second one will target 4% from May.

Following the headline announcement, RBI Governor Shaktikanta Das said, per Reuters, “The recent budget proposals and expenditure plans have raised hopes for a more robust recovery, and the bank stood ready to offer support and also ensure that the government’s heavy borrowing program was absorbed smoothly by the market.”

On a broader horizon, global markets remain lackluster during the Asian session ahead of the key US employment report for January. Though, the mood keeps the previous day’s optimism backed by the hopes of the US stimulus and covid vaccinations.

That said, S&P 500 Futures print mild gains after refreshing record top before a few hours while stocks in India rise half a percent by press time.

Moving on, USD/INR traders should pay attention to today’s US Nonfarm Payrolls (NFP), expected +50K versus -140K, for fresh direction. Also important will be the updates over market frenzy and US covid relief package.

Overall, USD/INR stays bearish amid recent fundamental improvement in India.

Technical analysis

Unless crossing a downward sloping trend line from January 11, at 73.10 now, USD/INR sellers can keep hammering the late 2020 lows near 72.75.